This Week in VIX Options and ETNs

On Friday VIX hit the lowest levels of the week, month, year, last 12 months, and since before 2008. Do keep in mind that is common in front of a three day weekend. VIX is a 30 day implied volatility measure and that means 30 calendar days and with 3 days of no trading option premiums come under a bit extra pressure and the result is lower implied volatility as indicated by those option prices. 

Despite the low level of VIX, there are still traders looking for a higher VIX in the next few months. For example there was a large buyer of the VIX May 18 / 25 Call spread last week paying just over 1.00 for the spread. If VIX is at or above 25.00 at May expiration (a double from current levels) the return would be about 6.00 on an investment of 1.00. Also, on Friday there was a buyer of 30,000 VIX Mar 17 Calls at 0.60.

In the ETN space, like VIX, the VXX ETN hit a new all-time low on Friday. VXX gets the most attention as it is the most actively traded VIX related exchange traded product. Friday was the last day for trading standard February options. I took a look at where the interest is for March VXX options. It looks like there are several bearish positions with the highest open interest on the VXX Mar 20 Puts at 88,000 contracts. The next highest interest is in the VXX Mar 19 Puts with open interest of 72,000 contracts.

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